
UK's FSA to tackle operational risk
The FSA has set up dedicated phone lines, postal and e-mail addresses for employees who suspect colleagues of financial wrongdoing, although there is no requirement for firms to distribute the contact information.
The UK financial watchdog will encourage staff to go to their senior management in the first instance, who should then inform the FSA. Those reporting fraud, or other malpractices, will not have to disclose their identity, although they will be encouraged to do so, said the FSA.
Whistle-blowers must “believe any allegations are substantially true” and are asked to come forward as soon as possible, rather than wait to collect evidence themselves. But the annonymity of whistle-blowers, should they choose to give details, can not be assured “since circumstances may be such that the disclosure of identity becomes unavoidable in law”, the FSA said.
“Whistle-blowing is a cost-effective risk management system, and so far the financial services industry has been enormously cooperative in its support of our approach,” said Carol Seargeant, managing director of the FSA’s regulatory processes and risk directorate.
Michael Smyth, a partner at law firm Clifford Chance and chairman of whistle-blowing lobbying group Public Concern at Work, said the scheme is valuable as an “early warning system” that could be used to avoid Enron-like financial mismanagement. “The question on my mind is whether Nick Leeson’s colleagues could have alerted regulators to his fraud earlier if this initiative had been in place,” Smyth added.
Although the scheme is only intended for financial firms with a presence in the UK, Smyth said he expects other European regulators to adopt similar approaches. “Regulation is about more than just picking up the pieces after the collapse. It’s about working to avoid disasters, and self regulation is central to a firm’s success,” he added.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Industry confused by EU’s ‘bingo card’ clearing rules
Uncertainty over definition of representative trades in Emir active account requirement
FDIC scrutinised over move to cover all SVB deposits
Advisory panel questions whether guaranteeing uninsured deposits was necessary to prevent contagion
EBA seeks to tighten up uneven prudent value adjustments
Regulator to consult ‘soon’ on changes to improve consistency of capital deductions
Post-Brexit divergence puts EU subsidiaries on the rack
Banks face choice between higher staffing costs or over-engineered processes at UK headquarters
SEC criticised for belt-and-braces ban on volume-based pricing
Legal experts question need for rules to prevent firms disguising agency trades as proprietary
SEC expected to protect CRT in conflicts of interest rule
Decision could come as early as today; high hopes for credit risk transfer exemption
FRTB managers face hard facts about risk factors
There are ways to reduce the capital charges caused by NMRFs, but they come at a price
SEC official defends delayed dealer registration rule
Regulator says market should be treated like equities, but PTFs warn it will harm market liquidity